01 March 2002
The next Spending Review (covering 2003 to 2006) is due later this year and a big increase in health budgets is more or less a formality. But with the economy slowing down, the message is becoming more overt that tax increases will be needed to cover the funding increase.
In the NHS itself, though, nobody was jumping for joy. `More money is always welcome but they always ask us to do more with it. We are expecting greater funding from the Spending Review, but extra cash always comes with strings attached,' one frontline manager told Public Finance.
Most NHS representative bodies did not even think the development worthy of reaction. The exception was Unison assistant general secretary Bob Abberley. `The NHS desperately needs continuing investment and if that requires increases in taxation then the government shouldn't be frightened to do that,' he said.
But are higher taxes really necessary to pay the price of an expanding NHS? Even if they are, will Gordon Brown deliver?
Carl Emmerson of the Institute for Fiscal Studies says the chancellor could increase NHS funding without raising taxes and still meet his `golden rules'.
`The public finances look okay,' he says. `The chancellor has committed himself to some measures, such as new tax credits, that will cost around £3bn, but if he wanted to increase public services spending he could just borrow more.' So why would the government want to increase taxes?
Emmerson says the chances of the chancellor committing himself to huge increases are slim. `There are competing priorities such as health, schools, transport and defence, and it is hard to find other areas that can be cut back significantly. Raising taxes to fund higher spending is the cautious route,' he says.
Each priority would get a funding boost and if the economy continues to do well Gordon Brown could use surplus revenues to top up NHS coffers, as he did in last November's pre-Budget report, he explains.
But would that be enough? The upward pressure on costs is inexorable as the government pursues cuts in waiting times, and the National Institute for Clinical Excellence recommends the use of new drugs and therapies.
The row over who should pay for long-term care will rumble on, especially as Scotland introduces free personal and nursing care for the elderly. In England and Wales, only nursing care is free.
A report on old age from the Left-leaning Institute for Public Policy Research due next week will call for all long-term care to be free. It says the distinction between nursing and personal care has created a `perverse incentive' for nurses to provide personal care tasks better suited to less-qualified carers.
Pay is the health service's biggest single cost and there will be no respite over the Spending Review period. On the horizon are new contracts for GPs and hospital consultants, as well as promised rises in the numbers of doctors and nurses.
The Agenda for Change negotiations should be completed soon. This will simplify the NHS pay structure but it will also add to the wages bill by moving many employees on to a higher pay scale. Pension contributions will rise in line with these costs.
Royal College of Nursing general secretary Beverly Malone says the chancellor must set aside £3bn to pay for the initiative and warned that NHS modernisation could fail if he does not.
`To attract nurses and especially to keep them for the long term, the government needs to invest seriously in the workforce through a modernised pay and careers structure. The Spending Review is critical to delivering this investment over the next three years,' she says.
It is a formidable list of demands on the exchequer. Perhaps it is understandable if the government feels the need to be cautious and resort to taxation to raise extra funding. As ministers see it, to coin a phrase, there is no alternative.
PFmar2002
